CCPA study exposes Ontario's "manufactured" fiscal crisis

April 9, 2001

Toronto--The only way the Ontario government can avoid a budget deficit in 2001-02 is to suspend the implementation of further tax cuts.

That's the conclusion of a study prepared for the Ontario Alternative Budget project by CCPA Senior Research Associate Hugh Mackenzie, who is also Research Director for the Steelworkers.

"If the Harris government proceeds with its scheduled tax cuts, it cannot avoid slipping into a deficit of between $1 billion and $2 billion in 2001-02," Mackenzie warns. "The actual amount varies under the 3 economic growth scenarios simulated by the study. For example, with growth at the current private sector consensus forecast, the deficit would reach $1.7 billion.

The study found that, contrary to the government's claim, Ontario does not have a spending crisis. Instead it has a revenue crisis--one created by the government's own policies.

The province's shrinking fiscal options are the result of the cumulative effect of five years of tax cuts and a steadily worsening economic slowdown. The study estimates that, by the time all the promised tax cuts are fully implemented, Ontario's annual revenue will be $20 billion lower than it would have been without the cuts.

"Six years of cuts in public spending have left Ontario with a serious public services deficit," Mackenzie observes, "and it affects all areas of the public sector, from health to housing to education to infra- structure. So there is no realistic prospect of dealing with the province's fiscal problems through spend- ing restraint."